Advertisement

Blog

Is Design Dominance Good Enough?

While the US electronics industry should not take its eye off the ball for a minute, the Americas still dominate as the leading design center for electronics products worldwide.

By the end of 2010, 36.9 percent of the world's electronics products will be designed in the Americas, according to market researcher iSuppli. Asia/Pacific is the second largest center of design activity in 2010, with 28.8 percent of electronics design taking place there; followed by Japan, at 20 percent and Europe, Middle East, and Africa (EMEA) 14.3 percent.

iSuppli's data is based on the use and consumption of semiconductors in each of these regions.

The US data isn't that much different than in 2006, when the Americas accounted for 34.9 percent of design-related chip purchases. However, China moved from fourth place in 2006, with 6.5 percent of the world's design activities centered there, to almost 29 percent in 2010. China's gain came partially at Japan's expense, which accounted for 24.9 percent of the world's design activity in 2006.

iSuppli noted then as it does now that the design activity shows a significant amount of disconnect from where semiconductors are ultimately shipped. Nearly 60 percent — 58.2 percent — of semiconductors shipped in 2010 will go to the Asia/Pacific region. Only 15.50 percent of chips used in 2010 will be shipped to the Americas, 13.8 percent to EMEA, and 12.5 percent to Japan.

Clearly this data shows the Americas' decline as an electronics manufacturing center. In 2006 — as more and more manufacturing moved overseas — companies in the Americas were still able to say, “We're still the center of design.” And we still are. But I am wondering how long that distinction is going to be good enough?

7 comments on “Is Design Dominance Good Enough?

  1. DataCrunch
    November 8, 2010

    Wow, what a wake up call for the US.  As long as the US continues to outsource its high-tech manufacturing overseas, the US will continue to lose jobs, including design engineers to follow.   Here are some facts to ponder: Foxconn employs more than 800,000 people, which is more than the combined worldwide workforce of Microsoft, Apple, Dell, HP, Sony, and Intel. 

    Here’s an interesting snippet from Bloomberg Businessweek in July by Andy Grove of Intel fame, Until a recent spate of suicides at Foxconn’s giant factory complex in Shenzhen, China, few Americans had heard of the company. But most know the products it makes: computers for Dell and HP, Nokia Oyj cell phones, Microsoft Xbox 360 consoles, Intel motherboards, and countless other familiar gadgets. Some 250,000 Foxconn employees in southern China produce Apple’s products. Apple, meanwhile, has about 25,000 employees in the U.S. — that means for every Apple worker in the U.S. there are 10 people in China working on iMacs, iPods and iPhones. The same roughly 10-to-1 relationship holds for Dell, disk-drive maker Seagate Technology, and other U.S. tech companies.”

    Silicon Valley, once known as the mecca for high-tech engineering hasn’t been creating many jobs as of late, except for jobs overseas.  The Bay Area has a higher unemployment rate than the national average.  In today’s worldwide technology environment, there is no reason why the engineering and design work can’t be done in China, India and others overseas.  This know-how and innovation leadership used to be unique to the US, but not anymore.  And now that US companies have freely outsourced their manufacturing overseas, it would be feasible that the higher-value jobs will soon follow.

     

  2. bolaji ojo
    November 8, 2010

    Barbara, You know the rapid growth of China in the electronics supply chain does not allow for any segment of the process to be dominated by any one country any longer. I cannot think of any engineer who wakes up each morning thinking all he or she wants to do is “low-level” design work. American domination of design activities will continue for a while longer but as you noted in your article designers in Asia will grab increasing share of design jobs. It doesn't mean the end of American involvement. It just means fewer design will be done here and transferred out there for production. It's a natural shift and it can't be stopped. The industry has to find a way to manage this transistion without leaving one region bare.

  3. Barbara Jorgensen
    November 8, 2010

    True–you can't have a global industry without seeing seeing migration of the process and then the IP. I wonder what, if anything, will fill the void? The U.S. was once a center of auto manufacturing innovation; then technology innovation; and next? Biotech? Clean energy? The way to maintain any kind of dominance is to continue to innovate. There will always be another fast-growth region changing the dynamic. Once it was Japan; now China; next India or central Europe? The challenge, as you say, is managing the transition. I think if the U.S. feels too secure in its dominance–of any kind–it will miss the next opportunity, whatever it is.

  4. hwong
    November 9, 2010

    The offshore outsourcing will continue for quite some time but the manufacturing cost also keeps rising due to stronger RMB, one of the factors. It will be a matter of time that China will have sufficient domestic consumption and advance R&D capability to sustain high pay jobs. It will be similar to Japan back in the 80's. By that time, if there is still enough jobs around the globe, market will drive the income compensation to pretty much same level between western world and our oriental partners. Then outsourcing will become history.

  5. tioluwa
    November 9, 2010

    The way i see it, the only thing that is good enough is making more profit. Outsources is cheaper and so creates more profit, so its good.

    Business is business, its all about the profit or is it?

  6. stochastic excursion
    November 9, 2010

    China is a very strong competitor, and not just because of its low overhead, as it's generally perceived.  Management practices in China are very well-understood.  This has enabled them to compete in very tricky industries such as high-speed electronic modules.

  7. Barbara Jorgensen
    November 10, 2010

    I have no doubt anything China sets its eye toward will be successful. As my colleague Bolaji said, “no one gets up in the morning and wants to design low-tech products.” China has embraced a lot of best practices as it has developed and design is no exception.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.